US Senator Bernard Sanders: Greece in the Midst of Great Depression; Urges US Support from Federal Reserve Bank

Citing severe austerity on the Greek people and ominous warnings of the rise of the Nazi Golden Dawn party in Greece, United States Senator Bernard Sanders (I-VT) sent a letter to the Chair of the Board of Governors of the Federal Reserve System, Janet Yellen, encouraging American intervention in the crisis for the benefit of Greece.

Sanders is the US Senate Budget Committee’s Ranking Member and his influence carries considerable weight.

“The United States cannot stand idly by while the European Central Bank undermines the new democratically elected government of Greece, induces deflation and risks financial instability. President Barack Obama was right when he recently noted, with regard to Greece: “You cannot keep on squeezing countries that are in the midst of a depression. At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits”

“Therefore, I am writing to ask you to make it clear to the leadership of the European Central Bank that the United States and the Federal Reserve object to actions that affect our national interest and risk U.S. and global financial stability through the unnecessary and counterproductive implementation of deflationary policies.”

Sanders stressed the United States’ leverage with the ECB, highlighting the $8 trillion that the Federal Reserve extended to the ECB during the financial crisis, as well as the current standing credit arrangement with the ECB on which the ECB can draw at any time.

“These swap lines, as they stand, tend to make the United States implicitly supportive of the policies that have so destabilized and damaged Greece. But they also give us a reason, indeed an obligation, to object when a partner Central Bank departs from its commitment to financial stability.”

“Several weeks ago the Greek people voted for a new government. This government canceled the privatization of key public assets, raised the minimum wage, and restored electricity to the needy. This government is seeking to restructure its relationship with the European Union to encourage economic growth in Greece and to escape from a deflationary cycle…It would be a terrible mistake for the world to forget what happens when a democratically-elected government, as was the case in Germany in the 1920s, is unable to relieve the severe economic suffering of its people.”

Sanders also cited the humanitarian crisis in the country.

“As you know, the Greek people are suffering from a severe economic depression. Due to deflationary-inducing austerity policies, the Greek economy is 25% smaller than it was just a few years ago. Unemployment, youth unemployment, homelessness, HIV, suicides, and even cases of malaria have increased. While the humanitarian cost is severe, budget cuts have failed to address Greece’s debt problems. The country’s debt to GDP ratio is higher than it was when austerity measures were first implemented. This situation threatens to create a Eurozone-wide deflationary spiral, it elevates the risk of financial contagion, and it undermines vital U.S. interests.”

The Vermont independent took to the airwaves to make his case, speaking passionately about his case for Greece during a CNBC interview and defending his position when asked by the host why special consideration should be made for Greece when the people of other countries like Portugal and Ireland had to also deal with their own austerity.